The UK pound has dropped to a record low against the dollar as markets react to the biggest tax cuts in the United Kingdom in 50 years. Kwasi Kwarteng, chancellor of the United Kingdom, has promised more tax cuts on top of a 45 billion pound package amid expectations that borrowing will increase.
The pound has also been under pressure because of the strength of the dollar. The euro also reached a fresh 20-year low against the dollar in trade amid investor concerns about the risk of recession as winter approaches with no sign of an end to the energy crisis.
According to reports, if the pound stays at a low level against the dollar, imports of commodities priced in dollars, including gas and oil, will be more costly. Several other goods from the United States can also be considerably more expensive, and UK tourists visiting the United States will find that their money does not go as far as before the drop.
There are many concerns that the tax cuts and an increase in government borrowing will fuel high inflation, and force the Bank of England (BOE) to increase interest rates even higher. This will lead to increased monthly mortgage costs for millions of households in the United Kingdom.